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Indian Real Estate Market- Heading towards a Probable Slowdown
Friday, February 01, 2008

Is the Indian real estate market heading toeards a slowdown? Seeing the momentary uncertain economic scenario, slowdown in export-driven industries, high interest rates and lacklustre credit growth in the real estate markets definitely raise a question.

Real estate development in India has been highly uneven. The nascent growth in our realty market, aided by copious flows of private equity, is helping the real estate development process get organised with increasing corporate and institutional participation.

These developments, coupled with healthy economic growth indicators and a new-found comfort in this sector triggered a lot of activity and capital appreciation in the sector over the past few years. While the overall activity in the market remains healthy, the past 12-18 months have seen some degree of rationalisation in residential prices.

Even though this might be a result of increased interest rates, decreased holding power of speculative investors and sudden flush of supply in some suburban areas, there is probably a case to admit that if not a slowdown, the marginal rate of growth certainly seems to have come down significantly as compared to the past few years.

Despite all this, the commercial and retail sectors continue to demonstrate record absorption and bullish price movement. One may however argue that significant supply on account of SEZs and other new projects may bring about some due rationalisation in prices in these sectors over the next few years.

If at all there is a slowdown, it will be a mild one given the demand indicators across sectors and the attractiveness of India as an investment destination. Also, a slowdown will be the best thing to happen for the long-term potential and growth of this market.



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